As we come to the end of the month, the prolonged volatility that started in August seems to have dissipated, at least to a degree. This means that investors can start to look at company earnings, instead of worrying about which way the market has swung on any given day.
Of the 50 plus companies reporting earnings or their current trading next week, I have picked out four interesting ones. As per the chart below, three have outperformed the FTSE 100 over the last quarter, probably due to the defensive nature of the businesses, while one has underperformed, which may have presented investors with an opportunity. Let’s take a closer look…..
High fashion
All eyes will be on Associated British Foods (LSE: ABF) when they report the final results to the market on Tuesday. Since reporting interims back in April, the share price has been on an upward trajectory, rising by 28%.
When management updated the market in September, they expected the full year results to be in line with expectations. Operating profit at constant currency was forecast to be ahead of last year for Grocery, Agriculture, Ingredients and Retail. However, the decline in operating profit in Sugar and the net adverse impact on the translation of overseas results arising from the strengthening of sterling, totalling some £30m, would give rise to an overall decline in adjusted operating profit for the group.
Turning to valuation, the shares currently trade on a forecast price to earnings (P/E) ratio of around 34 times earnings – that’s more than twice the market median of 14.1. Additionally, there is a forecast yield of just 1% on offer, well below the 3.09% market median according to data from Stockopedia.
Top tobacco
Also vying for investors’ attention on Tuesday will be Imperial Tobacco (LSE: IMT). For obvious reasons, this is not everyone’s cup of tea. However, those who held their nose and bought the stock just 12 months ago would be sitting on a 30% capital gain, while enjoying a 5% yield.
The company last updated the market in August, with management sounding very confident in relation to the strength of their portfolio, the development of the footprint, cost optimisation and strong capital discipline. All in, they expected results to be in line with expectations.
Despite the 30% rise in the share price, the shares are still trading on a forward P/E of 15 times earnings and yielding over 4%, which for a quality company such as this still looks attractive despite the rise in the share price.
Sugar and spice
And all things nice? That will be the question for investors following Thursday’s interims from Tate & Lyle (LSE: TATE) after what has turned out to be a tough trading environment over the last 18 months.
The general trading weakness appears to have had a rather detrimental impact on the share price with the shares trading at a 25% discount to their price 2 years ago. Still, this is perceived by the market to be quite a defensive share, which I think is reflected in the forecast P/E of over 16 times earnings, supported by the 4% plus yield on offer here.
It is unlikely that there will be too many surprises in the results — indeed, management guided the market to expect ‘in line’ results at the start of this month.
Banking on a recovery?
Last up is HSBC (LSE: HSBA). This UK-listed banking giant has seen its shares slump by 19% over the last year. It is hardly surprising given the decline in analyst earnings expectations, which have fallen from EPS estimates of 94 cents per share in October 2014 to 79 cents currently. Once investors start to factor in worries over the global economy, and in particular China, it doesn’t take a genius to work out why the shares have been under pressure of late.
Investors will also be expecting a progress report on the bank’s strategy update to focus its operations on the perceived high-growth of offer across Asia, not to mention an update on the latest charge for PPI mis-selling.
Despite all the negativity, the consensus analyst share price target is some 18% higher than where it currently trades. Additionally, it trades on a sub-10 P/E and offers a yield approaching 7%.
Whilst not without risk it’s certainly worthy of further research, in my view.
